Peru

Launch of four OECD reports on Peru

 

Remarks by Angel Gurría,

OECD Secretary-General

Lima, Peru, 14 October 2016

(As prepared for delivery)

 

 

It is a pleasure to be here today after participating in the Peru 2016 OECD Forum with Premier Fernando Zavala. The Forum aims to provide a space for dialogue on how to address the policy challenges faced by Peru.

 

The OECD is more than willing to support the Government’s agenda for reforms. In particular, we hope that the powers that Parliament granted the President specifically to push his legislative agenda through within 90 days will result in definite progress in areas that the OECD regards as key, such as combating fraud and tax evasion.

 

The OECD Country Programme for Peru provides a very useful means of achieving this goal and includes policy recommendations that draw on best practices and empirical evidence. As part of the Programme, I have today had the privilege of delivering four reviews to the President giving a detailed analysis of economic growth, public governance, territorial development and skills.

 

Please allow me to present the main conclusions of the reviews. I will take questions at the end of the presentation.

 

OECD Development Pathways - Multi-dimensional Review of Peru: Volume 2, In-Depth Analysis and Recommendations

 

A year ago, we launched the first volume of the Multi-dimensional Review, and now we are delivering a second document. This review is multi-dimensional because it makes recommendations in three areas that are key to fostering greater inclusive growth, namely diversification of production, improved transport connectivity and the promotion of formal employment.

 

The most productive sectors, such as mining, generate barely 4% of all employment; meanwhile, nearly half of all jobs are in less productive sectors such as agriculture and retail. Encouraging economic diversity and productivity means designing and implementing an agenda for all Peruvians that includes actions in various fields such as regulation and market liberalisation; the development of new competitive industries; innovation strategies; taxation and the use of income from natural resources; and improvements in the institutional framework in order to implement a strategic plan.

 

A range of sectors have the potential for diversification of production, and experience in the agroindustry, metalwork and tourism sectors has proved helpful in furthering their development and identifying the prerequisites for new industries such as forestry, processed fisheries products or minerals.

 

The ratio of transport costs to customs tariffs is 20 times higher in Peru than in the OECD countries overall. Improving transport connectivity requires improvements to the design and implementation of transport plans nationally and in urban areas. Reducing transport costs involves encouraging multimodal transport and “soft” actions that will reduce logistics costs within the existing infrastructure. The establishment of a logistics observatory is an essential precursor to identifying policy actions in this area.

 

The last major topic of the report is the formalisation of employment. Despite its increasing fall, informal employment continues to be unacceptably high and still affects over 70% of workers. In order to promote formal employment and grapple with the current high levels of informality, Peru should implement a comprehensive package of labour, fiscal and social protection measures supported by productive development policies.

 

Public Governance Review

 

The Public Governance Review is a response to the need to seek continuous improvement in the workings of the public administration. Politicians are undoubtedly essential in any democratic country, but without the backing of a strong, sound, technically proficient administrative service, any attempt at reform may be undermined.

 

Reform of the public administration is not a one-off initiative. Rather, it is a state of mind: a permanent state of mind that is also associated with an understanding of governance.

 

The focus of the review is an analysis of the performance of what the OECD terms the “centre of government”. Through the Presidency of the Council of Ministers (PCM), Peru has been consolidating a centre of government akin to that in place in some OECD countries. The challenge is to strengthen its capacity to co-ordinate, in order to achieve sustainable economic and social growth that improves the well-being of all citizens. The proposals made in the Review include building on the PCM structure (changes began in August based on the recommendations in the Review), establishing consistent medium and long-term development objectives for the country and providing sufficient economic resources to achieve them.

 

The Review also has a strong focus on key aspects of the “machinery of State”: an effective, efficient, transparent and open administration. This means modernising the way that public administration works, not only through new technologies (“electronic government”) but also by making the most of the huge human potential in the country in the form of trained public servants who are keen to move the country forward.

 

Last, but not least, the reform agenda must also be pursued in Peru’s regions and cities. The Review advocates completion of the decentralisation process so that the regions can fully develop their potential.

 

Territorial Review

 

Peru’s regions are diverse and poorly connected; each region has a different economic structure and a different potential for growth, productivity and diversification. Realising each region’s potential will require integrated policies that are tailored to their unique individual circumstances and can simultaneously improve skills, innovation, infrastructure and the business environment. Improving the order of public investment priorities and embedding them into regional fiscal frameworks should be a key reform priority. In particular, the Territorial Review advocates:

  • Development of an overarching focus for urban policy that incorporates incentives and technical assistance for provinces and municipalities so that they can both implement planning instruments and land management systems (zoning, planning approvals, land register) and enforce laws to protect public assets and land.
     
  • Improvement in the administration of land use and infrastructure for functional urban areas. This includes ensuring that each city has an approved strategic spatial plan and urban plans, and that there is a co-ordinated process to link them with national and sub-national infrastructure investment decisions.
     
  • The formulation and implementation of a comprehensive reform of sub-national finance, to include an increase in the proportion of investment funds (such as mining royalties) allocated to the regions and a drop in the proportion allocated to the municipalities; and the introduction of mechanisms to provide for a more equitable distribution of investment funds across the regions. These measures would help to overcome the problem of low-quality, fragmented investment that is ill-suited to the basic needs of the population.

 

Skills beyond School: A Review of Vocational Education and Training (VET)

 

Peru has a broad range of vocational training programmes, over 2 000 suppliers of technical vocational education (the bulk of them in the private sector) and ever-rising tuition fees. Many of the programmes provide high calibre vocational training.

 

Despite the growth in VET provision and the number of graduates, there continues to be a significant unmet demand for skills, especially technical skills. Peru has some of the essential building blocks of a high-performing VET system, but they are often under-used. The Skills beyond Schools Review provides a set of specific, appropriate recommendations on how to capitalise on them.

  • First, it recommends improving the match between the supply of VET programmes and the needs of the economy. This will mean enhancing and extending the data systems that connect educational and labour market outcomes, and tracking students’ transition from the classroom to the labour market.
     
  • It also recommends providing quality assurance for all technical VET programmes while continuing with work to roll out an effective accreditation system.
     
  • Finally, it is also important to strengthen public institutions that provide technical education programmes by increasing their budgets in the aim of improving their facilities, enabling continuous faculty development and further professionalising their management.

 

Conclusion

 

We hope that the recommendations contained in these four reviews will help the Government in the important reforming agenda that lies ahead. These reviews, along with the other reports we have recently delivered on regulatory policy and environmental performance, demonstrate that the OECD is available to you to support the changes that Peru needs to make in order to consolidate and deepen its development. We are also completing other reviews in areas such as statistics, skills, young people, health and public procurement that will be ready halfway through next year.

 

You can count on us. You can count on the OECD and our experience based on good practices. Together, we can design, develop and deliver better policies for better lives for all Peruvians.

 

Thank you.

 

 

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